Watch brands are failing online retail the same way they flounder with brick-and-mortar stores
I spend a lot of my time trying to decipher the strategies and assumptions of European luxury brands when creating their e-commerce platforms and presentations. E-commerce is probably the most important topic in the luxury watch industry given the context of the COVID-19 pandemic, and yet little has really changed since the start of 2020.
The status quo foresees that much of the in-person shopping experience previously associated with buying a luxury watch is increasingly moving online. This fact alone doesn’t give too many clues and advice to watch brands on how to actually make this move – and over the past few years I’ve noticed watch brands investing in commerce platforms electronics, to see them simultaneously doubling over in- retail and distribution to the person. Why? Because very few of them have succeeded in e-commerce and fall back on the convenience of wholesale distribution. What are they doing wrong and what lessons should the watch industry learn from them?
The first thing anyone will notice when they take a close look at any given brand’s e-commerce strategy is that those strategies materially fail to take into account two key facts about selling luxury watches. The first fact is that wristwatch sales often require a hands-on human touch, and second, the outlets are not ATMs. A luxury brand website will generally not sell watches unless a consumer is motivated by outside motivations. So, watch brands seem to have an unrealistic expectation that they can invest some money in a website and then people will stumble upon it and shop there.
While e-commerce performance has been on the rise since the pandemic, most of the winners are the new native digital watch brands and, for the most part, not the existing pantheon of luxury watch names. Before the pandemic, even proud watch brands admitted that their direct-to-consumer e-commerce platforms rarely exceeded 10% of their total sales. The strategy and shape of these websites has changed little during the pandemic, and I don’t think there will be any groundbreaking changes to watch brands’ e-commerce platforms on the horizon.
The implication is that if watch brands are serious about selling to consumers online, they still need to come up with sustainable practices and strategies to get there. My suggestion is that maybe they should stop trying and consider more alternatives to selling their watches directly through e-commerce.
I’ve written many times in the past that I think a direct-to-consumer e-commerce solution is a bad idea for as many as 80% of established luxury watch brands. In theory this makes sense, but in practice it ignores much of the wisdom the watch industry should have learned a few years ago. Let me pivot the concept and reframe the discussion of e-commerce so that it is no longer an alternative to selling in physical stores. Most of the time when this topic comes up, the context seems to be around the failure of tourism and street shopping as the reason why e-commerce is needed. Unfortunately, that’s not the real problem. If that was the real issue, all watch brands would have made it easy for their existing third-party retailers to sell online with certain territorial protections. That’s not what’s happening.
What’s happening is that luxury watch brands are seeing direct-to-consumer e-commerce as another incentive for “margin clawback,” a concept that corporate-owned watch brands have been thoroughly obsessed with for years. 1990.
The background is this: if a watch brand sells a watch directly to a consumer, it can charge for the entire retail sale and keep more of the profit margin for itself instead of sharing it with an agent. third-party sales. Watch brands went on the offensive from the 1990s and well into the 2000s to end third-party distributors around the world and bypass third-party retailers by creating their own brand boutiques. The idea was part of a massive campaign to cut middleman profits and capture as much revenue as possible from global markets. It was greedy and it didn’t make many watch brands friends.
Many brands have had to back down. This involved turning away from branded boutiques and reconsidering working with third-party distributors and retail partners. The last 25 years in the watch industry should have been an important lesson that most European luxury watch brands don’t have what it takes to both produce watches and sell/distribute them. They have seen firsthand the problems that arise from eliminating traditional sales agents and continue to search for the perfect strategy that will turn their e-commerce platforms into unstaffed sales machines. It didn’t happen and it won’t happen.
Flashforward today and we see a trend of e-commerce stores run by watch brands following suit in the “cut the middleman” approach that hasn’t worked very well for the past 25 years. Watch brands now believe that with their own email lists, Instagram channels and digital storefronts, they can brave online business themselves and consistently sell to consumers without the help of third parties. This again turns out to be a failure for most brands.
The most common question brands ask me on the subject is “who does e-commerce well?” The answer I give now is “brands that trust the right professionals to sell for them on their own third-party platforms”. In other words, the digital equivalent of authorized resellers.
This means that watch brands have to share the margin again – but I’m making this suggestion for their own good.
Going it alone in the internet jungle is only possible for brands with the largest marketing and sales teams, and who are serious about investing in marketing, human resources and building ongoing relationships.
I have yet to come across a brand that is set up to do this. And frankly, how could they be? Human resource issues in the watch industry today mean that most brands are basically set up to design, produce and ship watches only.
Things like customer service or marketing efforts are treated as a boring afterthought. Little money is invested in this area per brand. But do you know who invests in this area? Specialist watch retailers – so why not take advantage of them?
I’ve always said that the watch industry is at its best when there are people producing watches (brands), people talking about watches (media), and people selling watches (retailers). For a sustainable, long-term market to evolve online, each of these parts must be distinct. Consolidate them and either you run into conflicts of interest or a simple lack of proper investment, which has itself been the bane of the recent watch industry’s capacity for innovation and expansion.
In summary, most watch brands’ e-commerce strategies are little more than a newly reinvigorated effort to eliminate the retailer and thereby generate more profits.
Little is done to authentically grow an online market, which requires spending money, allies, and a lot of human attention. This greed has been poison to the growth of the watch industry over the past 25 years, and it has not resurfaced under the guise of being a “natural and reasonable response to COVID-19”.
This is not a reasonable answer as it once again ignores the crucial role motivated third parties play in the ability to sell luxury watches to consumers. If the watch industry doesn’t learn from its past – then not only is that ironic – but it will cause even more problems for the business community which is desperate to find a new normal in the market.